Question

During 2017, Crane Company started a construction job with a contract price of $ 1,610,000. The job was completed in 2019. The following information is available.

		2017		2018		2019
Costs incurred to date		$ 366,300		$ 772,100		$ 1,063,000
Estimated costs to complete		623,700		330,900		–0–
Billings to date		300,000		909,000		1,610,000
Collections to date		271,000		807,000		1,424,000

Compute the amount of gross profit to be recognized each year, assuming the percentage-of-completion method is used.

Gross profit recognized in 2017		$ enter a dollar amount
Gross profit recognized in 2018		$ enter a dollar amount
Gross profit recognized in 2019		$ enter a dollar amount

Prepare all necessary journal entries for 2018. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. For costs incurred use account Materials, Cash, Payables.)

Account Titles and Explanation	Debit	Credit
enter an account title to record cost of construction	enter a debit amount	enter a credit amount
enter an account title to record cost of construction	enter a debit amount	enter a credit amount
(To record cost of of construction.)
enter an account title to record progress billings	enter a debit amount	enter a credit amount
enter an account title to record progress billings	enter a debit amount	enter a credit amount
(To record progress billings.)
enter an account title to record collections	enter a debit amount	enter a credit amount
enter an account title to record collections	enter a debit amount	enter a credit amount
(To record collections.)
enter an account title to recognize revenue	enter a debit amount	enter a credit amount
enter an account title to recognize revenue	enter a debit amount	enter a credit amount
enter an account title to recognize revenue	enter a debit amount	enter a credit amount
(To recognize revenue.)

Answer 1

Answer:

Calculation of the amount of gross profit to be recognized each year, assuming the completed-contract method is used.
					2017($)	2018($)	2019($)
Contract Price (a)	16,10,000	16,10,000	16,10,000
Actual costs incurred to date	3,66,300	7,72,100	10,63,000
Estimated costs to complete	6,23,700	3,30,900	-
Total Estimated Costs (b)	9,90,000	11,03,000	10,63,000
Estimated Gross profit/(Loss) c= a-b	6,20,000	5,07,000	5,47,000
% of completion= Actual cost to date/Total Estimated Costs	37%	70%	100%
GP Earned today = Gross profit * % of completion	2,29,400	3,54,900	5,47,000
Less: GP earned in previous years	-	-2,29,400	-3,54,900
Total GP Earned /Recognised	2,29,400	1,25,500	1,92,100

Entries for 2018
	Dr	Cr
Construction In process	$4,35,800
Materials, cash, payables		$4,35,800
(7,72,100-336,300)
Accounts Receivable	$6,09,000
Billing On Construction In process		$6,09,000
(909,000-300,000)
Cash	$5,36,000
Accounts Receivable		$5,36,000
(807,000-271,000)
Construction expenses	$4,05,800
Construction In process (gross profit)	$125,500
Revenue from Long term contract		$531,300
(1610,000*(70%-37%))